Technical analysts see something worrisome as the S&P 500 hits more record highs: The breadth of the gains are narrow. That is, a small number of stocks are participating in the record highs with 52-week highs of their own. That’s a downer for anyone looking for stocks to buy because a lack of breadth is usually a sell signal.
But a lack of breadth doesn’t mean the market is doomed. Sure, it warrants caution, but there’s ample reason to expect more market gains through year-end. Hey, even if stocks are in a bubble, they have plenty of room to inflate — the forward price-to-earnings ratio on the S&P 500 is nowhere near what we’ve seen in prior bubbles.
At the same time, stocks that are hitting 52-weeks highs usually have more gains ahead on technical strength alone. Friday’s session saw 26 stocks in the S&P 500 notch 52-weeks highs before noon, with pretty much every sector contributing.
The biggest names to recently hit new highs were Apple (AAPL), Walt Disney (DIS), Microsoft (MSFT) and Intel (INTC). Financials also notched some new highs, which you’re expect, since the Financial SPDR (XLF) keeps hitting one-year marks. Individual financials touching new highs of late include Morgan Stanley (MS), Invesco (IVZ) and Northern Trust (NTRS).
The following list of stocks to buy is a look at companies that are poised to keep setting new 52-week highs through the remainder of the year thanks to fundamentals, as well as technical indicators like trading above key moving averages.
High-Flying Stocks to Buy – Apple (AAPL)
Sure, Apple stock might sell off in the immediate aftermath of the new smartphone’s debut, as traders “buy the rumor and sell the news,” but if sales are as strong as some analysts predict, Apple has plenty more upside ahead. A ridiculous pile of cash doesn’t hurt either because it bodes well for dividend hikes and share buybacks going forward.
On the technical side of AAPL stock, shares are comfortably above their moving averages. AAPL stock is 6.4% above its 50-day moving average and 22% above its 200-day MA. Furthermore, AAPL stock appears to have support locked in at the 50-day, giving investors and traders some comfort for limited downside.
High-Flying Stocks to Buy – Disney (DIS)
Click to Enlarge As for Disney (DIS), the stock isn’t just hitting 52-week highs — it’s at all-time highs. Disney has become almost boring with the way it beats Wall Street estimates. Indeed, in the most recent quarter, Disney profits hit a record high.
The latest catalysts for DIS stock could be the company’s first major marketing push touting the Star Wars franchise it acquired for more than $4 billion a couple of years ago. Indeed, Star Wars (as well as Marvel and its other franchises) should fuel new highs for Disney stock for years to come.
As for the technicals, look at the chart and you’ll see a great strategy for playing Disney has been to buy it anytime it gets within sniffing distance of its 50-day moving average, which has been a trampoline of support. DIS stock sits comfortably above its 50- and 200-day MA, and has a history of market-beating gains in September and October.
High-Flying Stocks to Buy – Morgan Stanley (MS)
Click to Enlarge The white shoe investment bank has reinvented itself by relying much more on wealth management — a less sexy but also less risky business. In the most recent quarter, Morgan Stanley’s (MS) profits nearly doubled year-over-year and earnings per share beat Street estimates by a whopping 39 cents a share.
Investors keep favoring Morgan Stanley because fixed-income trading is a small part of the business. Trading revenues are in free fall across the industry, but wealth management is growing sharply at Morgan Stanley. That should keep MS stock in flight.
Morgan Stanley stock has treated its 50-day moving average like a plaything all year, but it finds rock-solid support at its 200-day, which currently stands at $31.17. That not only helps limit any downside, but has been a reliable buy signal for the year-to-date too.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.